BROOKE LIVELY
We don't grow for growth's sake. We grow when it can impact the bottom line.
SONYA PALMER
To have control of your finances is to have control of your firm and your life.
BROOKE LIVELY
I am doing this to be profitable because when I am profitable, we can hire more people. When we hire more people we can help more clients. I can provide more jobs. I can enable more women to be mom and use their incredible brights.
SONYA PALMER
According to a recent survey, only 19% of managing partners in US law firms are female. We would like to see that change. Hello and welcome to LawHer, the show where we celebrate the trailblazing attorneys and entrepreneurs who are changing the game for women in the legal field, be inspired by their stories, learn from their mistakes and look forward to the future they're helping build for the next generation of women in Law. I am Sonya Palmer, your host and VP of operations at rankings. The SEO agency of choice for personal injury lawyers. This is LawHer since 1974 and the passing of the Equal Credit Opportunity Act American women have had unfettered access to banking without a male co-signer. Despite nearly 50 years of financial female firsts, like self-made billionaire, Martha Stewart, and head of the federal reserve. Janet Yellen, women remain largely absent from high finance. A record number of women are getting MBAs, but only 6.5% are graduating in finance. And that number is down from 7% in 2007. So when given the chance to talk with Brooke lively president at Cathedral Capital, I was thrilled. She holds an MBA in investments and corporate finance, which makes her a bit of a unicorn. And after graduation, Brooke built a seven figure company in under two years. As a chartered financial analyst, she and her team work with Hall of Famers, Inc 5,000 businesses, CEOs and small business owners to help turn businesses into profitable companies. Today we discuss why so few women are in finance, why she prefers to hire mothers and the six key numbers your firm needs to understand to increase your bottom line. And Brooke has always been enmeshed in the legal space. Let's dive in.
BROOKE LIVELY
My father is an attorney. My brother's an attorney, of my uncles who are attorneys, virtually every guy I ever dated as an attorney. I'm unmarried, obviously I need a new type, but I've watched so many lawyers and so many firms struggle with the numbers in their business and let's face it every attorney went to law school because they were promised them numbers. They were taught one formula. What is one third of any number and advance class was what's 40% of a number. Law school doesn't prepare them to own a business and they don't love numbers. And there's some fear around it and there's, they're taught to be the expert and all of a sudden here they are in a place where they're not the expert and they don't know the answer. And so I just, I hate that people are struggling in that environment. I work with lawyers and marketing. It's the same thing. They went to law school to be a lawyer. They start their own firm, finances, numbers, Greek they want to be the authority. It's the same thing with marketing, like it's foreign, but they want to be the authority. And don't, you want to have some control over those things?
SONYA PALMER
Absolutely it's your business, like it's your business.
BROOKE LIVELY
Don't you want to be able to know that you're going to have enough clients coming in? Yeah. You need to learn how to control that marketing. You need to learn how to look at your numbers. And I guess one of the things that I've seen so many attorneys do. And I'm sure you've seen this too, is they go down this rabbit trail and try to learn it so deeply. I've had clients that are like, okay, so I'm working on my SEO. I'm like such a waste of your time.
SONYA PALMER
Thank you we'll do that for you.
BROOKE LIVELY
And it's the same thing with your numbers. You need to have a basic understanding, but having somebody there who interprets it for you,
SONYA PALMER
Yes.
BROOKE LIVELY
makes all the.
SONYA PALMER
I think it is their passion though, for those things that makes me all of us, probably we want to help them. They're so passionate about it. They want to get it right. I want to help people like that. So I love that. Did you know, you always wanted to open a firm like Cathedral then? Or was that organic?
BROOKE LIVELY
Oh no, this was a total accident. So I don't know. Aren't all the best businesses accidents I was at working for my. Actually I was working for a hedge fund because, that's what you do when you have the education that I have. And my father notorious for shedding, his law partners every seven to 10 years. So we had come up on that timeframe and he shut his partners and he lost his the woman who ran his practice and she needed been with them for 30 years. And she went with his partners and so he was like I need some help setting up this new firm.. I go, okay. So I did the, I was an analyst for a hedge fund. They didn't care where I worked. So I worked from his office a few days a week and I worked from their office a few days a week and I ran his firm and eventually I quit the hedge fund. And I really started running his part by the numbers because that's what I know. And it was amazing. The small tweaks I could make the impacted profitability and I hired a consultant to help with sales and marketing because, my father was notorious for clients just findus. Let's see if maybe we can drive that.
SONYA PALMER
Yeah, influenced that a little bit.
BROOKE LIVELY
Let me see if I can impact that at all. His clients started coming to me and saying, can you do for us what you do for your family's law firm? And that was when I really understood how intimidating the financials can be for a lawyer. And let's be very, clear. Attorneys are smart. They are more than capable of doing this. They can learn everything that I know without a problem. It's just a waste of their time.
SONYA PALMER
Yes. I, again, I think trying to help them understand that, go be a lawyer, go do what you do best what let us help you. And those that understand that are then the ones I think that see the most success.
BROOKE LIVELY
I think they are. I think there's something to learn in delegating there's an exercise. I don't know if you've ever read Traction by Gino Wickman.
SONYA PALMER
We love Traction.
BROOKE LIVELY
So you know that exercise delegating.
SONYA PALMER
Yes.
BROOKE LIVELY
What is it that you're doing? What is on your desk? What can you delegate to somebody else that it's their bliss and how can you elevate yourself to being more valuable to your firm?
SONYA PALMER
Yes exactly. A record number of women are entering MBA programs, but the finances sector is still dominated by men in 2007, 27% of MBA graduates were male. 7% were female. Today the percentage of women MBA graduates in finances, 6.5%. You hold an MBA and investments and corporate finance, which makes you a bit of a unicorn. Why did you pick finance?
BROOKE LIVELY
Totally by accident. I went into grad school thinking I was going to do the typical female thing, which was marketing right. So we get in grad school, you've got case studies. And so we did the first case study. It was on BMW, on their C3. We do this whole case day. I get to the end. I'm like what's the right answer. And professor looked at me and said, there's not a right answer. I'm like, okay. Daughter of an attorney, let me rephrase. What did BMW ultimately decide to do? He's that's totally irrelevant I'm like this is not, meanwhile, I could go over to finance and be like, step A step B step C. And here is the right answer. Every single time. Now I got more advanced and I learned how I could manipulate the numbers, but there was an answer. There was a solid Concrete answer and I am a solid concrete kind of gal. And so the machinists, the unknown, the like in finance, there's a specific path in marketing it's way more creative than that. And I'm like, yeah, I'm out. I don't do The creative.
SONYA PALMER
The gray area, you know where with finance there's less. And then with marketing, there's a lot more That's left up to interpretation. So that's interesting because women, I find women to be very logical. why do women shy away from the financial sector? Why aren't there more women in the financial sector?
BROOKE LIVELY
When I was in high school, I went to a high school. That was a little different. we went to school four days a week, and the fifth day we had a job, an internship. So you did different things, different years. Yes. I was the legislative assistant in charge of the Alaskan affair. I worked on Capitol hill. My junior year and senior year, you get a job that is in the industry that you think you want to be. Yep. Let me tell you about growing up. And one of my best friends named Courtney, whose father was in finance. In fact, he's the guy that greenmail Disney is the one that with one phone call made Michael Eisner, the CEO of without consulting anybody else on the board.
SONYA PALMER
Wow.
BROOKE LIVELY
Yeah. So here's Mr. Rainwater. He's so stinking smart. He's so much fun. And he's got all these absolutely adorable Wharton grads that work for him that all drive fabulous BMWs. And when you're in high school, come on, what do you want? You want the cute boy with the Wharton degree and the BMW. So I'm like I'm going into finance. So I get a job working for Drexel Burnham. Drexel at the time was one of the top investment banking firms on wallstreet think Michael Milken, That's who he worked for. And so I'm like, great. This is it. I got plan. I'm going to do this. I'm going to go to UVA. I'm going to go to Wharton. And then, I'll be in finance. And so I was also a nationally ranked squash player and I was being recruited by Penn to play squash. So I'm like, okay, so I don't have to go to UVA. I can go Penn. And then Penn Wharton. It's like this will work. So I go to the managing partner that I worked for and I'm like, will you write me a recommendation? Because shockingly, he was a Wharton grad. And he said, I'm happy to, what do you want to do? I'm like, oh, here's my plan. Penn undergrad work in grad school. And he's do you want to come back to work here? And what do you say "Yes, of course, that's why I'm interning here you moron!" right. I said Yes. And he took a breath and he said, here's the thing, with an MBA from Wharton, you will never be anything more than a glorified secretary. In this company. We have one female trader in New York and we have two in LA. I was like, I don't want to fight that. That's not worth it to me. And I think that. Still there is some of that. It is a boys club My friends that worked for Goldman were like, oh yeah, we had meetings at strip clubs all the time. Now it is getting better. If you're 22 and coming out of school, I think it's a little better a bit, but it is a boys club. And and I also, think, and this was my, again, my personal experience. was in a co-ed school. I ultimately went to an all girls boarding school for high school, but like my freshman year in high school, I was still in a co-ed school. And anytime I really participated in class, anytime I was smart, like the guys looked at you a little differently and it wasn't like the cute girl they wanted to take out on Friday night. So you dumbed down and I think, yeah, I think it happened. And yeah, I think that's part of why finance does not look so attractive to women. You gotta be smart, you gotta be driven and that's threatening,
SONYA PALMER
No. And then know that's the environment that you're like to be placed in .
BROOKE LIVELY
Yeah.
SONYA PALMER
And what you're describing within the finance industry is something that women in the legal industry experience. So many of the terms that you just
BROOKE LIVELY
Oh, yeah.
SONYA PALMER
Secretary threatened, intimidated. And so I, it, you can't ignore and I'm seeing this with so many of the female lawyers that I'm talking to, who are fed up with that and they forge their own path. I'm going to do it. I'm gonna start my own firm. I'm going to do it my way. I'm going to pioneer that.
BROOKE LIVELY
I just went to a conference fairly recently, The Society of Women Trial Lawyers. And it was the first conference site I ever had. And it was so awesome because there were all these women at some huge firms and there's one woman named Sarah Williams, who
SONYA PALMER
She was our first, she was the first guest on law. Her she's amazing.
BROOKE LIVELY
She is amazing.
SONYA PALMER
Talking about this, I was like, Sarah Williams must be the first guest. And she was,
BROOKE LIVELY
And she wants that. That's I like, I love Sarah. She's amazing. So we are at this conference and she gets up and she's giving a speech and she's we need a seat at the table and you know what, if they won't let you sit at the table, go build your own freaking table. She really stood up and demanded a place at the table and she found her voice. And I think you see all of those names on Facebook that say for all of you, women who have been labeled as aggressive, key being assertive, like what are those words that are different for women than for men, but you know what. I don't really stinking and care anymore. Yeah. Why are words like aggressive, assertive, confident, bold why are they masculine words? It's much more the connotation of not feminine or not nice or not. I guy doesn't really want to be called aggressive. He's perfectly happy to be called assertive and he is much more likely to be called assertive.
SONYA PALMER
So you had a plan expectations what lined up and then how was it different from your expectation?
BROOKE LIVELY
Yeah. Okay. So this guy. Told me, I'd never be more than a glorified secretary. And I am so grateful that he said that and he said it from a truly kind place, because it enabled me to make the decision. Do I want to be the one who is banging my head against that glass ceiling or not? And really, I was like F you people I'm out. Which unfortunately left me without a plan and I didn't have a plan for a really long time. Like really a long time I graduated from college with this totally impressive sounding degree that enables me to do nothing. So I moved to Colorado. I tried being a ski bum. I like floated around. I ended up in retail. I did well with that. And then I went back to grad school at 35. And it's interesting that you talked about the percent of women that graduated a finance degree in 2007, because that's when I graduated.
SONYA PALMER
Wow.
BROOKE LIVELY
And once again, I was like, okay, so I've got a better plan. And the plan at that point was, hedge fund because that's what you're supposed to do with my degree.
SONYA PALMER
Yeah.
BROOKE LIVELY
And. There were certain things about that job that I loved, anytime I could figure out how to screw the government out of taxes, like that made me super happy.
SONYA PALMER
Yeah, that's fun.
BROOKE LIVELY
That's a good one. But I really, I floated until this opportunity came up and I realized that while I had always worked for very entrepreneurial companies. So I worked for Nordstrom, which gives you so much free rein to run your department. And so I really wasn't audited. They really do have a lot of entrepreneurs in that company. I love it. I love not working for anybody else. I love being the one that makes the ultimate decision on a scale of one to 10. My risk tolerance is a 15. And so like I'm a great business owner. I'm a great entrepreneur.
SONYA PALMER
I would love to talk about Cathedral Capital. Can you talk about why you hire a women?
BROOKE LIVELY
Okay. Now let's be clear. I am approaching the number where I can no longer hire all women? So I do have one token guy. When
SONYA PALMER
That probably doesn't happen very often. So
BROOKE LIVELY
I got.
SONYA PALMER
there's a token boy. Excellent.
BROOKE LIVELY
A token boy.
SONYA PALMER
Mostly women hire mostly women.
BROOKE LIVELY
Yes. Mostly women. When I started this, I realized that there are so many women who are so educated and they have incredible skills and they get married and they get pregnant and they leave the workforce. I've watched it happen to my friends. I've watched it happen to just people. I know. And I'm like, why are we wasting all that intellectual capital? And I get that being a mom is the most important job, a hundred percent. And I support you in that, but let's see if we can find a way to harness that intellect between 8:30 and 3:30. What can we do in between carpools? So with the exception of our leadership team, almost every single person on our team is part-time. We absolutely believe in. I'm not supposed to say work-life balance because it will never be balanced, especially to say work-life integration. Like, how do you plan your working hours to not interfere with those things that are the most important to you. So at CATHCAP nobody misses a recital. Nobody in this is a field trip. Nobody in this is a class party. Unless they want to, but that happens too,
SONYA PALMER
Yeah. Skip snack day.
BROOKE LIVELY
Oh, I'm so sorry. I have to work that day.
SONYA PALMER
Yeah.
BROOKE LIVELY
There are all these amazing people and I love hiring them and I love giving them an opportunity to take their brain out for a spin because let's face it when you're staying at home with toddlers, it just turns to mush.
SONYA PALMER
Yes. I think that even a lot of the women that have families, they have kids. They stay in the workforce, but they abandoned advancement. No. So they just accept status quo. They're doing their job. They do good work, but they're not pushing to be in leadership roles because of that they feel like they have, they always have to choose their family. If they choose advancement, then something's wrong. And the part-time, there's a lot to unpqack. I find that women are incredibly productive. Can get done, in four hours, what another person could get done in six or eight. And I love the complete work-life balance myth. I like know if it's a Friday afternoon, and my worst on it, I want to take my dad to the movies. I'm taking my dad to the movies,
BROOKE LIVELY
Oh, yeah.
SONYA PALMER
But if I get an idea on Saturday morning, and I want to spend 30 minutes checking in or writing it down. I want to do that too. So I think like letting women, letting people with families just have that ability to, pick up and put down without trying to balance just that attitude would help so much. Cause I agree they're abandoning the workforce and then just advancement being in those leadership positions. And it's a detriment to everyone that they're not contributing.
BROOKE LIVELY
So there's another thing that's interesting that I read. And of course, I can't remember where I read it, but one woman had finally made partner. She was the only female. And then she got on that committee that decides who the new partners are going to be. And that was a really eye opening moment for her because they started looking at all the people who, were up for partner and they kept choosing all the guys. And she's what about these women? And they said they don't want it. What do you mean they don't want it? Joe has been coming to us and talking to us about it. And Robert brought in that big client and talked about it and blah, blah, blah, blah, blah. And and Mary doesn't do any of that. And she's and yet Mary has brought in more clients than Robert and has out billed John. And what she discovered was that women think that their hard work is going to be recognized and they're not raising their hand. And you got to raise your hands.
SONYA PALMER
Yeah. You got to raise your hand.
BROOKE LIVELY
And so she started a program, a mentorship program at this firm. It was like, you may not think it's nice. You may not think it's polite. You may not think it's lady like, but I need you to go out there and I need you to tell every stinking partner how much business you just brought in and I need you to go out there and I need you to brag about the results for your clients. And I need you to go out there and talk to those partners about what you want to do when you are a partner, because otherwise you're going to continue to be overlooked.
SONYA PALMER
Raise your hand and speak up, not just to highlight your accomplishments, but to ask for help. Brook spells out how and when to talk to a financial consultant for your law firm.
BROOKE LIVELY
I think there's a hierarchy, a financial people you need to consult. I think the first thing you need to do is get a bookkeeper. If you're doing $75,000 or a $100,000 a year in revenue, get a stinking bookkeeper because I promise you- they are a better bookkeeper than you are!
BROOKE LIVELY
And I guarantee it takes them less time to do it than it takes you. And if you're freeing up, let's say that you spend an hour a week doing your books and you bill out at $300 an hour. That is $1,200 a month in forgone revenue. Right? You're doing a hundred thousand dollars, I promise you, you can hire a bookkeeper for less than $1,200 a month. So it's literally costing you money, not to outsource that.
SONYA PALMER
It's not about what it's saving you. It's about what it's costing you.
BROOKE LIVELY
Exactly. You have to start looking at the opportunity cost of everything that you're doing. Hiring an assistant as the same thing. How many hours a week are you spending doing clerical things that you could pay someone $20, $25, even $30 an hour to do that would free you up to go spend that hour. if you pay someone $30 an hour to go do a job and it frees up an hour for you that you then bill at $300. That is a 10 X, multiple. That is a great investment all day, every day. And when you're looking at hiring that person, so I don't have a calculator here, so I'm going to have to do some rough math in my head. So $30 an hour, 40 hours a week is $1,200 a week. Is that about right?
SONYA PALMER
Yep. I'm going to pull the calculator up.
BROOKE LIVELY
$4,800 a year. So we're looking at about $60,000 a year. Give or take, we're going to round it to 60. How many hours do you have to bill to cover that? If it costs you $1,200 a month to employ them, it has to free up four hours of your time. Can you free up four hours of your time? Bill that much more. So you really want To look at the opportunity cost of things. And so when we're talking about financial people, the first one you really need is your bookkeeper. And of course you always use the tax accountant don't discount the tax accountant. But so after you do that, as you're growing your firm,Thinking think of your law firm is a bus and you're the owner. And you're sitting in the front of the bus, driving down the road. The bookkeeper is sitting all the way in the back and they're looking out the back window and they're telling you everything that's happened. Oh, we hit a pothole. Oh, we spent this last week up. Ooh, we slid across the line and then the other line there. Okay. Now we're back on track right there telling you what happened and they're recording what happened very accurately. What a lot of attorneys need, especially as they start to hit that million dollar mark is someone sitting in the front of the bus with them saying, okay, now we're going to go around this curve and there's going to be a giant pot. So I'm going to need you to be in the left lane to avoid it. Here's what's coming. Here's what we can do to mitigate the damage to the bus. We don't want to drive through the giant pothole and possibly lose the tire. We want to avoid that. So as you hit that million dollars as you start to have additional attorneys working for you as you've got a paralegal, as You start to have kind of more moving parts, we can start to impact your firm better. So are we paying people in a way that they're profitable for us? Are we moving our cases through the firm in an efficient way? If you're hourly, Are we collecting at least 92% of what we bill most of our firms collect closer to 98%.
SONYA PALMER
Wow.
BROOKE LIVELY
Oh yeah. We got the whole AR thing down, are we collecting if you're a PI firm, are we projecting out your revenue for the next two years by month? Because that's really important that allows us to make decision. So there's a lot more that we can impact as you get a little bigger.
SONYA PALMER
Yes. So you liked that million dollar mark?
BROOKE LIVELY
We do, we like that million dollar mark we'd like those people who are motivated, who take action, we don't like shock about the same thing every month for seven months.
SONYA PALMER
You're the bus analogy. I think you go from that mitigate protect. Okay. Survive versus that front seat person also mitigate protect, but now let's capitalize on opportunity. Let's grow.
BROOKE LIVELY
And Let's look forward and let's be proactive. Let's not just react. Let's be proactive about some of the decisions we're making.
SONYA PALMER
That's one of my favorite things about growing businesses, legal marketing is that sort of point where you can stop being reactive and start being proactive. That's a really fun spot to get to.
BROOKE LIVELY
And it in here's the thing, it hits everybody in a different.
SONYA PALMER
Differently. Yes.
BROOKE LIVELY
Some people will get that at 400,000. Some people won't get that until $4 million. It's so dependent upon me owner that it's such an amazing moment. When, we talk about having a dam or a diet and it's leaking everywhere, right? So we patch up the biggest hole, which allows us to see where the next biggest hole is. And you keep patching and patching and patching patching and patching and patching it. And eventually. You've patched everything. And now you get to look at it and say, okay, where is it weak? Where does it need to be shored up before something happens? It's That's just so stinking. Cool.
SONYA PALMER
Yes. Yes. And then How do you make it better?
BROOKE LIVELY
How do you make it more profitable? Because. There are a lot of people that are really obsessed with their top line number. I've got a $1 million firm, I've got a $5 million firm. We have a client one time who was with us and then left. And I talked to him a few years later and we were chatting and he's yeah, I hit 7 million. I'm like, oh, Scott, that's awesome. He said, yeah, but. I wasn't taking home any money. In fact, I was putting my savings into the firm. Did I teach you nothing? What happened? And he's everyone around me was saying grow. I'm like, we don't grow for growth's sake. We grow when it can impact the bottom line. And he said, yeah, I finally figured that out. He closed down an office. He fired a bunch of attorneys. He went smaller. He's 3 million now and he's taken up and he's making money.
SONYA PALMER
Yes. It sounds greedy, but I do think that so many times business owners, even employees lose sight. Your goal is to make money, do good work, help clients be amazing at your job, but at the end of the day, you have to make money. If make decisions differently.
BROOKE LIVELY
I have a friend who refers to her husband's job and I can't remember her exact words. And now she can't either. Cause I've asked her like he's basically their tax write off.
SONYA PALMER
That's good. You need those.
BROOKE LIVELY
Yeah. I don't think I want my business to be a tax write-off. That's not why I'm doing this. I am doing this to be profitable because when I am profitable, we can hire more people. When we hire more people we can help more clients. I can provide more jobs. I can enable more women to be mom and use their incredible brights. I can help more law firms not struggle in silence in isolation with their financial fears and you know what? I can make a good living for myself. And That's a win-win situation.
SONYA PALMER
That's the payback. Pay employees, hire people, pay those employees more money, like to be able to put that back into the business and by business. Team like that is very rewarding.
BROOKE LIVELY
And one of the other things I say is he who takes the risk, reaps the reward.
SONYA PALMER
Yes.
BROOKE LIVELY
And so as a business owner, you are taking risks. Look at me, I got to come up with payroll every two weeks,
SONYA PALMER
Yeah,
BROOKE LIVELY
And if it's not in the account, it's up to me to get it. I, it has my personal guarantee on the lease. It is my personal guarantee on the lines of credit. It is my personal guarantee on the credit cards I've taken on the risk. And so as a business owners, you should be rewarded for that. Because your employees are taking virtually no risk.
SONYA PALMER
Yes.
BROOKE LIVELY
Going to get paid on Tuesday, whether they've built five hours or 500 hours.
SONYA PALMER
Yes. They talk about CEO owner, being a very lonely position. And I think part of that, most of it may be even as exactly what you just described at the end of the day, the risk is yours
BROOKE LIVELY
Yeah.
SONYA PALMER
and only, or.
BROOKE LIVELY
And you need an outlet to talk about that. That's one of the things we love, why we love doing what we do. We are usually one of the first C-suite people that actually is engaged in a company. So we have these firms and they hire us and they don't have anybody else that they can talk to about strategy and Yeah. they're lonely. They're sitting there by themselves trying to make those decisions and all of a sudden someone like us shows up, it makes it not quite so lonely. And I gotta tell ya, everything shows up in your numbers. We know everything.
SONYA PALMER
Let's talk about numbers. Let's talk about numbers. So I want to talk about in your book from Panic to Profit, you talk about, imagine you're vacationing on a beautiful island resort, no phone, no internet. And the only contact you have is a supply boat. That's coming in once a week. What are the three pieces of information you need to know for you to stay another week? What are those.
BROOKE LIVELY
So that was a question I'm in a group called Entrepreneurs Organization, EO, and I was at an EO meeting in Denver and somebody asked me that question and I was like, huh. But three pieces of information. Do I know? So I came back to my team and I'm like, guys, what are the three pieces? They're like it's a three I'm like, I don't know, is it three? Is it six? Is it 12? Is it 30? What are the pieces of information? So we finally realized that most businesses and therefore, most law firms really are divided into six areas and each of those areas has a key number. So the first one is cash. Everybody knows the cash is. And what the number we want to see is our cashflow forecast. How much money are we going to have at the end of every week for the next six to eight weeks? Because Sonya, that money does not come in into your company at exactly the same amount every week. And it shrewd and flow out the same amount every week one and three are just really hard cause you've got payroll and rent. So what does that cashflow forecast? So if I'm sitting on the beach deciding if I have to get on the supply boat and go back, or if I get to stay, I want to know how much cash we're going to have every week for the next six to eight weeks.
SONYA PALMER
Yes.
BROOKE LIVELY
The second one. When we look at a law firm is we talk a lot about ideal ratios and, we talked about the rule of thirds and where we're spending our money, but really the ratio we're most interested in is owner compensation. What percent of revenue are you taking home? Can you afford to pay for this five star resort for another week or not? That's important to
SONYA PALMER
it? Yes.
BROOKE LIVELY
Yeah. So we need to know that. So then as you're sitting there and we're talking about the different parts of your life, Then we start looking at like production, the engine, that's driving everything. And we always want to know forward looking numbers. When possible, we don't want to know what the bookkeeper's telling you in the back of the bus. We want to be looking out in front. So yeah, Leading. what's coming up. So we want to look at work in progress because this month's web is going to get billed on the first of next month. So it's next month. So what's your whip. The next one we want to look at. So I need, this is in your neck of the woods marketing and sales.
SONYA PALMER
Yeah,
BROOKE LIVELY
Okay, great. We got it right now but what's going to happen. So what we want to look at are your sales calls booked because that tells us if we're booking a sales call this month and we're signing them up. Next month that'll be with, and the month after that, it's going to be revenue. So we can see this progression. So you talked about forward-looking you, you talked about leading indicators. So now we're making that leap further out, instead of just looking at next month, now we're looking at month after next. So how many sales calls do you have booked? And then as we're doing that, and as we're having these sales calls, we want to start looking at case management. Okay, can the firm do the work that we have? Are we properly staffed for it? And the number you want to look here. Are net new cases. So every month you're going to close cases and every month you're going to open new cases or matters, whatever word you like to use. What's your net new number. This lets us look really far in the future. If we know that you're from that one, attorney can handle 200 cases and you're picking up 20 net new cases a month. So we're signing on 30 we're closing. Ten four net new of 20. I love it. When I start like throwing out these numbers and then try and do the math in my head. All right. So net new of 20 and an attorney can handle 200. We know that we need a new attorney in 10 months. When you rather know that you needed a new attorney in 10 months, then no, you need a new attorney in 10 days.
SONYA PALMER
Absolutely.
BROOKE LIVELY
So that's the really important one. So now we're looking out a few months, you're sitting there, you're like, okay, the cash is in the bank. The law firms got enough cash to get through the next six to eight weeks. I'm going to make enough money that I can pay for this. I've got enough whip that I know the revenue's going to be there next month. I know I've got enough sales calls booked that we're going to have revenue month after next. I know. That I've got enough people to work. The cases that we've got.
SONYA PALMER
Yes,
BROOKE LIVELY
So the last number you really want to look at is your budget to actual, and that's a follow on report. And I really hate the B word. Nobody wants a budget. We actually call them profit plans because as entrepreneurs, we're all about the possibility, not the prohibition and budgets are nothing, but they tell you what you can't do. And I want a profit plan that tells me how I get to spend money to make more money, right?
SONYA PALMER
I'm going to take that. I'm going to steal that.
BROOKE LIVELY
Yes. Now, unfortunately I have not been able to convince Intuit the makers of QuickBooks to change their verbiage. So the report is still called budget to actual, but, are we on track? Where do we need to readjust? Are we pretty close to where we need to be? If we're pretty close to where we need to be, then absolutely let's stay another week. ,
SONYA PALMER
Excellent. Is there a number that you look at it and you immediately can spot a weakness or an area where affirm. Is there something that immediately stands out to you? That's troublesome.
BROOKE LIVELY
Yes. One of the things we do really early when working with firms is we put them through what we call the profit finder. And the profit finder helps answer the question that I get asked the more, the most often, how much should I spend on how much should I spend on marketing? How much should I spend on my people? How much should I spend on this? How much should I spend on that? And really what I think they're asking is how much should I spend on all of this stuff? How much should I be making? The profit finder runs loosely off of the rule of thirds one-third of your revenue should go to your people, doing the work one third should go to overhead. And one third should go to you as an owner compensation, total owner compensation. And so one of the first things we do is we put clients through this and we start to look for anomalies. Are they spending 70% on payroll? Not uncommon. But if you're spending 70% on payroll and 30% on overhead, there's nothing left for you.
SONYA PALMER
Yes.
BROOKE LIVELY
What are you spending on marketing? We generally say it should top out up 10%. And let me tell you it doesn't hit that eight, nine, 10% until you're at $750,000 below that it's really relationship marketing. It's shoe leather. And I've seen so many firms at like 400,000. I'm so sorry to say this go, oh my gosh, I need pay-per-click. I need SEO and I made this and I need that. And I'm going to do all these campaigns and I'm like, that's all well and good. But you don't have the backend set up to support that.
SONYA PALMER
You're absolutely correct. And with legal, it is one of, if not the most competitive industry and it would be a misuse of their money to start that investment too soon.
BROOKE LIVELY
Absolutely.
SONYA PALMER
Now when you get to the point where you're healthy and you're ready to rock now you call us.
BROOKE LIVELY
And when you have the staff and when you have the technology to continue to nurture those potential. Just putting it out up on Facebook and not having the whole backend of what's going to happen. What's the call to action. How do they contact you? How do you attract that person and make sure they're not falling through the cracks? That's huge.
SONYA PALMER
Yes. Attribution are your leads coming from PPC? Are they coming from organic search results and then knowing where to put your money, where you need to capitalize on that?
BROOKE LIVELY
And then looking at your pack, your cost of your client acquisition cost.
SONYA PALMER
Yeah.
BROOKE LIVELY
So yeah we say that, you shouldn't be above 10% and we see people, especially in PI that are spending 20, 30% to get a case. And we're like, Yeah. again, If you're spending 30% just to get the case and you're spending 30%, let's say for the people to work the case, and you got you're starting to run out a percent and it comes out of your pocket.
SONYA PALMER
Yes. Yes, absolutely. So is there a number need to look at?
BROOKE LIVELY
I think It depends on what stage of your business you're in.
SONYA PALMER
It makes sense.
BROOKE LIVELY
If you are smaller, it's absolutely your cashflow forecast. Because if seven weeks out that you're not going to Make payroll, there is stuff that you can. You can get a line of credit, you can sell something. You can like all, you can talk to your your rent to your building and see if you can, yeah. Kind of push this back by a week. When it's seven days, when it's seven hours, you can't do anything about it. Especially those smaller ones as firms get bigger, their cashflow tends to not be quite as tight. So then we start to look at other numbers. Then we get to look more ahead than we get to look more at, the sales calls and the net new cases, because once you've got your cashflow, Working then you really can't be much more proactive. And those other numbers enable you to do that.
SONYA PALMER
Excellent. That makes. A few more here for you. As an entrepreneur owner, finance expert legal industry, what advice or insight would you give to a female lawyer? That's thinking about starting her own firm.
BROOKE LIVELY
Go for it! I would say the things that I have seen to be the hardest to use an expression, the hardest nut to crack there too. One is how to get new clients. And this is your realm. If you are a total introvert who doesn't want to talk to people and network. I'm thinking your own firm is not really your bliss.
SONYA PALMER
Yeah.
BROOKE LIVELY
If you don't have a problem getting clients, because that is something that is, that's hard to fix, especially. Like based on your personality. So if you can get clients start your own firm, don't be afraid to reach out to experts. Like you like me, there are people out there who are willing to help you on a fractional basis that will get you where you need to go. So do it. And you know what lean on your friends. are other people who have gone out and done this before you, you do not have to reinvent the wheel.
SONYA PALMER
You are the author of three books. Are you reading anything right now?
BROOKE LIVELY
Oh, my gosh. Im reading like 12 things.
SONYA PALMER
List them, please.
BROOKE LIVELY
I think some of the ones recently that I've really enjoyed are the Gap and the Gain, which and of course don't ask me who wrote anything because, I'm lucky to remember my siblings names. But one of the things that talks about is as entrepreneur. We're always looking forward and we're always looking at our goal. And as we grow, the goal changes, right? As you approach a million dollars, the goal is no longer $1 million. Now it's two or five or 10. And so the goals become like the horizon and it doesn't matter how fast you peddle. You are never going to reach the horizon, which leaves a lot of entrepreneurs feeling almost like failure. 'cause they've never hit the horizon. And it's about stopping and looking behind you instead of looking at the gap between where you are and where you want to be, it's looking behind you and seeing everything that you've gained.
SONYA PALMER
We covered a lot today, and I really encourage you to go back and listen through and pick up Brook's books to really dig into your firm's finances. And whether you're looking to get a handle on your firm's finances or spend an extra week on vacation, here are the six key numbers again. One: cash flow forecast for the next six to eight weeks. Remember cash is queen. Two: ideal ratios of owner compensations. There are only so many percent available. Are you getting yours? Three: work in progress. What work is in your pipeline that can be billed next month? Four: marketing and sales. How many lead calls are booked out? Five: case management and net new cases. Can the firm handle the amount of work that will be brought in? And six: what's your budget to actual? This is the profit plan that lets you know, how and when you can spend more money. And remember that the most important number depends on your firm size. There is no one size fits all and asking for help so that you can do what you do best will always be the best course of action. A huge, thank you to Brook for sharing her story and unbelievable insights with us today. You have been listening to LawHer with me, Sonya Palmer. If you found this content insightful, inspiring, or it just made you smile, please share this episode with the trailblazer in your life for more about Brook Lively, check out our show notes, and while you're there, please leave us a review or a five star rating. That really goes a long way for others to discover the show. And I will see you next week on LawHer where we'll shed light on how another of the brightest and boldest women in the legal industry climbed to the top of her field.
